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Relational contracts and adaptation: application to a pork producer contract

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  • Kostas Karantininis

    (Institute of Food and Resource Economics (FØI), Faculty of Life Sciences (LIFE), University of Copenhagen (KU), Denmark)

  • Jesper T. Graversen

    (Institute of Food and Resource Economics (FØI), Faculty of Life Sciences (LIFE), University of Copenhagen (KU), Denmark)

Abstract

In this article, we apply a formal theoretical model of adaptation to an empirical setting within specialized pig production. The objective is to allocate decision rights ex ante so that actual decisions taken ex post will optimize the profit accruing to both parties in a contractual or integrative relation. Motivated by the situation in the market for piglets in Denmark, we focus on an analysis of a vertical partnership between a piglet producer and a finisher. By applying a model of adaptation to the particular setting, we provide a solid basis for discussions on both the importance of efficiently allocating decision rights and the usefulness of the partnership as organizational form between specialized pig producers. © 2008 Wiley Periodicals, Inc.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 24 (2008)
Issue (Month): 3 ()
Pages: 342-354

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Handle: RePEc:wly:agribz:v:24:y:2008:i:3:p:342-354

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Michael D. Whinston, 2003. "On the Transaction Cost Determinants of Vertical Integration," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 1-23, April.
  3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  4. Jonathan Levin, 2000. "Relational Incentive Contracts," Working Papers 01002, Stanford University, Department of Economics.
  5. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
  6. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
  7. Jeffrey J. Reimer, 2006. "Vertical Integration in the Pork Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 234-248.
  8. Tomislav Vukina & Porametr Leegomonchai, 2006. "Oligopsony Power, Asset Specificity, and Hold-Up: Evidence from the Broiler Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 589-605.
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Cited by:
  1. Pascucci, Stefano & Cicatiello, Clara & Franco, Silvio & Pancino, Barbara & Davide, Marino, 2011. "Back to the Future? Understanding Change in Food Habits of Farmers' Market Customers," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 14(4).

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